Politudes provides information capsules, summaries and commentary on national and international developments in social policy, research on social well-being, and the effectiveness of social programs and systems

Education as Equalizer or Industry? New Issues and Challenges

The OECD is encouraging member countries to increase educational attainment to support economic growth in the face of prospective economic slowdown. They also recommend broader access to higher levels of education to offset increasing economic inequality. Question is, are increased attainment and broader access complementary objectives? And are they attainable?

OECD countries are spending more on tertiary education. But they are also relying more on private funding.

Tertiary institutions and, to a lesser extent, pre-primary institutions obtain the largest proportions of funds from private sources: 31% and 19%, respectively. Public funding on educational institutions, for all levels combined, increased between 2000 and 2011 in all countries (except Italy) for which comparable data are available. However, with more households sharing the cost of education, private funding increased at an even greater rate in more than three-quarters of countries

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Source: OECD (2014), Education at a Glance 2014

The results of greater spending are striking: The proportion of adults with post secondary (or tertiary) education is increasing rapidly, and young adults have more education than the older generation.

Close to 40% of 25-34 year-olds now have a tertiary education, a proportion 15 percentage points larger than that among 55-64 year-olds.

In some OECD countries, younger adults have higher rates of tertiary education than older adults, especially among younger women who lead older women by an average of more than 20 percentage points in all countries. In some countries, the difference between generations is significant. In Korea, for example, there is a 52 percentage-point gap between these two age groups in tertiary attainment levels. By contrast, in Germany, Israel and the United States, difference between age groups is less than 3 percentage points

There is little doubt about the returns to tertiary education. Graduates earn more and their advantages accumulate over the life course. But education does not automatically decrease inequality. Income inequality has been increasing in parallel to increased attainment, and wealth inequality has increased even more dramatically. The benefits of family economic status are passed on and in the USA especially, intergenerational social mobility has slowed from a flow to a trickle.

Attainment in primary and secondary levels predisposes many youth in their opportunities to advance in the education system. Miles Corak (milescorak.com) has observed that the model prevalent in Canada, for provincial governments to fund all schools on an equitable per capita formula, permits lower-income Canadian children to benefit from comparable education resources at that level, and social mobility is higher in Canada. In the USA, school budgets tend to reflect the affluence of the community, and therefore more sorting of life chances takes place in the primary and secondary system. The US spends more per capita on primary and secondary schools than any other country except Switzerland. Yet the average American high school kid is below the OECD average on standardized tests (PISA 2013), well behind countries like Finland, and way behind the kids in many Chinese cities. Canada does a bit better at about the OECD average.

President Bush seemed to recognize the problem with his famous “No Child Left Behind” program, but his solution was to push schools to compete for funds, based on standardized tests. He also opened the door for “charter schools” to use flexible methods in hiring and paying of teaching staff, and in curriculum design. There is not a lot of evidence that his approach succeeded in helping disadvantaged children move ahead, although the experiment is not complete.

President Obama has recently pointed to the failure of America to sustain the dream that hard work can permit anyone to earn a middle class income. Indeed the income scale has become so distorted in the USA that to earn the “average income” a person would have to be at the 75th percentile on the income scale.
(Mapping and Measuring the Distribution of Household Wealth: A Cross-Country Analysis, Frank Cowell, Eleni Karagiannaki and Abigail McKnight October 2012 http://www.lisdatacenter.org/wps/lwswps/12.pdf)

While education can potentially contribute to both growth and decreased inequality (witness the shrinking gap between the incomes of men and women) the approach taken to paying for education matters a lot. Getting it right is critical to a country’s social and democratic fabric.

Education is expensive, but countries like Denmark, the other Scandinavian countries at different levels, and Germany, pay most or all of the costs of postsecondary education and training. They collect more taxes to do this of course. Germany also enters into agreements with industry to extend apprenticeship training which dovetails with broader educational credentials. The US and Canada, and to some extent the other Anglo countries, provide for more diversity in funding, with higher tuitions paid by families, augmented by loans, private scholarships, and part – time work.

But expense is not the only funding issue. The OECD points out (Education at a Glance 2014) that education is becoming a globalized industry and is a major factor in the economies of member countries. One might think that this would be the ideal situation for mutually sustainable social and economic development. But the OECD has a different twist on the issue. They suggest that a preponderance of public funding cannot be maintained if the industry is to grow, and that an even greater flow of private funding is needed. Increasing revenues for higher institutions come from economically privileged students from other countries.

Between 2000 and 2011, the average share of public funding for tertiary institutions decreased from 73.7% in 2000 to 69.1% in 2005, and then slightly to 68.3% in 2011

Education at a Glance 2014, OECD

So now it is not only differing national social preferences but the need for education systems themselves to compete in a global market, which keep policy makers awake at night (or at least we hope it does). To grow education it seems we need more private money flowing. Yet greater private involvement may tip the system toward increasing inequality.

The current levels of access to higher education are not turning the tide of inequality except between the genders, and assortative mating (partnering with someone with similar attainment) may increase household inequality. So can countries guarantee their children full access to education regardless of their income status? Will education systems provide equality of life chances, or will they become industries catering to the needs of a global elite? The stakes are large. The conundrums are real. We need some good minds to tackle these issues.